Neobank market to triple to $11.65 billion by FY25: report

The country’s neo-banking market is expected to triple to $11.65 billion (about Rs 92,000 crore) by FY25, according to a report on Thursday.

Due to the scale of the Indian market, there is a substantial opportunity for neobanking to create value for a large segment of customers, while leveraging the vast talent pool available to create high-quality banking products focused on technology, Grant Thornton Bharat said in a report.

The neobank market is well placed to capitalize on the growing digital economy and achieve rapid growth due to the very dynamic local market with significant growth potential in terms of revenue generation potential, he said.

The Indian neobank market was valued at $3.42 billion as of FY22 and is expected to grow at a compound annual growth rate (CAGR) of 50.5% over three years to reach $11.65 billion by FY25.

Neobanks can be defined as digital branchless banks that interact directly with customers and provide them with a seamless banking experience.

Neobanks are arranging customized financial services products by delivering them entirely online, either through strategic partnerships or by creating their own products after approval from relevant regulators.

Currently, RBI neither recognizes nor regulates purely virtual banks.

The report suggests that the regulator needs to ensure there is regulatory clarity, consistent monitoring and oversight.

With India’s growth story heavily reliant on its young population and more than 50% of the population under the age of 28, the report assesses that future consumer trends will be driven by the first generation of true digital natives in the world. banking sector.

This generation rarely visits a branch to transact and have very different expectations of their banks in terms of products, service delivery and transactional experience.

According to Jaikrishnan G, Partner, Financial Services Consulting, Grant Thornton Bharat, the neo-banking industry may face challenges from entrenched players, their reliance on banks, security issues, regulatory ambiguity, increased competition from fintechs and super-apps that combine elements of e-commerce, payments and financial services on the same platform.

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